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Should we be calmer about #Klarna?

Back in 2015, I interviewed Nikolas Adalberth, a co-founder of Swedish FinTech unicorn Klarna. Little did I know back then that they would be of the biggest stars of FinTech and the creators of BNPL, the Buy Now Pay Later, revolution

Is it a revolution? Not really. It’s just another form of credit, but people like to debate these things, mainly as it is viewed as a way of people spending more and getting into credit debt more (see Wonga).

I posted a tweet the other day which kind of shows Klarna as a bit of a mirage …

But here’s the thing. When you see a business growing fast …

Year       Revenue

2016       $384 million

2017       $451 million

2018       $588 million

2019       $772 million

2020       $1.07 billion

2021       $1.42 billion

… can you ignore it?

Maybe …

Year       Profit

2017       $37.4 million

2018       $10.8 million

2019       ($92.8 million)

2020       ($167 million)

2021       ($730 million)

Source: Business of Apps

Bear in mind that Klarna’s 2021 results are reflecting massive expansion and a challenging year (did you hear about COVID?). Reading through the details the business claims it is robust:

Net losses at Klarna ballooned fivefold last year as the instalment credit business shouldered heavy expansion costs and a rise in customer defaults.

However, despite the losses of SwKr7.09 billion (£558 million), the Swedish group, which has expanded aggressively with its “buy now, pay later” offering, said that it had won 46 million new customers in 45 countries, boosting its total customer numbers to 147million.

Net loan losses because of customers not repaying debts more than doubled to SwKr4.65 billion, an increase “entirely explained by Klarna’s growth, expansion to new markets and massive inflow of new customers”, according to Sebastian Siemiatkowski, its chief executive and co-founder. He said that loan loss rates were down by 30 per cent since 2019 and that “99 per cent of our lending globally is repaid”.

Maybe rightly so as a colleague, Arjun Vir Singh (a Dubai guy), posted this:

👉🏼 operating losses of $748 million for the full year 2021 (losses grew by 408% compared to $150 million reported in the year prior)

👉🏼 potentially a new funding round that will value it at up to $60 billion

👉🏼 Gross merchandise volumes reached record levels of $80 billion

👉🏼 net operating income increased 38% to $1.6 billion

👉🏼 company recruited 46 million new consumers and now are serving over 100m customers

👉🏼 extended its reach to 45 countries.

👉🏼 99% of their lending globally is repaid.

👉🏼 Pay Now immediate settlement option represents c40% of their total transaction volume (confirms their status as a marketplace)

👉🏼 Klarna’s retail partners received 301 million clicks from consumers via the Klarna app globally in 2021, increasing their traffic by 2.6 times compared to 2020.

👉🏼 Klarna offers its retail partners marketing and media solutions, including virtual shopping, comparison shopping service, influencer marketing, a browser extension and sponsored placement and messaging in the Klarna app (not just a BNPL soln)

In fact, Klarna’s fastest growing market is America where fill now, pay later is even a thing …

All in all, all that Klarna is doing is reinventing credit for the digital age. Got a problem with that?

About Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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